Micron Completes Acquisition of Elpida and Assets

Micron [NASDAQ:MU] today announced that they have completed the acquisition of 100% of Elpida‘s equity, which means that there are no other stakeholders in Japan’s Elpida and that Micron owns all of Elpida’s assets, which include stakes in other companies like the Taiwanese Rexchip. By acquiring 100% of Elpida’s assets, Micron gains a 300 mm DRAM fab in Hiroshima, Japan as well as an assembly and test facility in Akita, Japan. Micron also gains a 65% stake in Rexchip in addition to a 25% stake which they acquired from Powerchip today. This gives Micron an 89% stake in Rexchip and unchallenged ownership. The addition of Rexchip’s shares means that Micron also takes ownership of a 300 mm DRAM fab in Taiwan.

If you take into account the manufacturing facilities of both Elpida and Rexchip, you are looking at around 185,000 wafers per month. Each wafer is a 300 mm wafer, which means that Micron’s overall manufacturing capacity of DRAM and NAND chips has increased significantly. The approximate increase is around 45% of Micron’s current manufacturing capacity, which means that Micron has just become a significantly bigger player in the already sparse memory market.

What this means for the enterprise and consumers is that there is one less competitor in the market to fight against when it comes to price. Yes, Micron did save Elpida, but now Micron is big enough to compete with Samsung and SKHynix. A good example is from the DRAMeXchange’s Mobile DRAM research, there aren’t many big players in the mobile DRAM market.

Now, when you combine Elpida with Micron, you can see that this slips them into second place all the way from fourth place. They simply did this by acquiring the number 3 competitor and leap-frogged their number two competitor. Obviously, Samsung is still the giant in the room. You can also see that the consolidated company is bigger than SKHynix in branded DRAM marketshare as well.

So, looking at these charts and graphs, what do we see? An oligopoly, and if you consider how harmful oligopolies are to innovation, I fear what might happen to technologies like ReRAM once they mature and we start to see them in consumer products. I’m afraid that we might see the prices for such technologies strangling innovation and allowing these companies to enjoy large profit margins. We will also have to watch even more closely for price manipulation and fixing, more than ever before.

I’m not necessarily happy that Elpida was gobbled up by Micron, but considering the bankruptcy and such, there really was no other choice. Plus, I don’t think the Japanese government necessarily wanted one of Elpida’s Korean competitors acquiring their assets. We’ll have to see in the future how this affects future pricing and supply since there are fewer companies in control of supply and pricing.